<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT of 1934
For the transition period from to
Commission File Number: 0-19599
WORLD ACCEPTANCE CORPORATION (Exact
name of registrant as specified in its charter.)
South Carolina 57-0425114
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
108 Frederick Street
Greenville, South Carolina 29607
(Address of principal executive offices)
(Zip Code)
(864) 298-9800
(registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter period than the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
(Check Mark)Yes No
Indicate the number of shares outstanding of each of issuer's classes of common
stock, as of the latest practicable date, November 13, 1996.
Common Stock, no par value 18,902,073
(Class) (Outstanding)
This Filing contains 16 pages. The
Exhibit Index is on page 14.
1
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
PAGE
<S> <C> <C>
Item 1. Consolidated Financial Statements (unaudited):
Consolidated Balance Sheets as of September 30,
1996, and March 31, 1996 3
Consolidated Statements of Operations for the
three-month periods and six-month periods ended
September 30, 1996, and September 30, 1995 4
Consolidated Statements of Shareholders' Equity
for the year ended March 31, 1996, and the six-month
period ended September 30, 1996 5
Consolidated Statements of Cash Flows for the
three-month periods and six-month periods ended
September 30, 1996, and September 30, 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the three-month
periods and six-month periods ended September 30, 1996,
and September 30, 1995 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 4. Submission of Matters to a Vote of Securityholders 12
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 16
</TABLE>
2
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, March 31,
1996 1996
ASSETS
<S> <C> <C>
Cash $ 1,558,164 1,693,747
Gross loans receivable 107,691,859 99,425,915
Less:
Unearned interest and fees (22,667,878) (19,802,649)
Allowance for loan losses (5,456,761) (5,006,703)
-------------- --------------
Loans receivable, net 79,567,220 74,616,563
Property and equipment, net 6,053,022 5,643,120
Other assets, net 2,997,521 2,609,329
Intangible assets, net 4,113,399 4,859,807
------------ -------------
$ 94,289,326 89,422,566
============ =============
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Senior notes payable 50,600,000 37,750,000
Other note payable 482,000 482,000
Income taxes payable 201,535 2,311,456
Accounts payable and accrued expenses 4,334,484 3,999,442
---------- -------------
Total liabilities 55,618,019 44,542,898
------------ -------------
Shareholders' equity:
Common stock, no par value - -
Additional paid-in capital 4,422,259 14,625,136
Retained earnings 34,249,048 30,254,532
------------ -------------
Total shareholders' equity 38,671,307 44,879,668
------------ ------------
$ 94,289,326 89,422,566
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
------------------------------- ----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Interest and fee income $ 16,139,302 14,665,264 31,438,083 28,543,699
Insurance and other income 1,855,274 2,726,051 3,862,959 4,709,134
------------ ------------- ------------ -------------
Total revenues 17,994,576 17,391,315 35,301,042 33,252,833
------------ ------------- ------------ -------------
Expenses:
Provision for loan losses 3,027,989 2,526,397 5,273,654 4,165,577
------------ ------------- ------------ -------------
General and administrative expenses:
Personnel 6,756,704 6,217,929 13,562,690 12,374,986
Occupancy and equipment 1,288,542 1,062,572 2,496,150 2,093,659
Data processing 259,896 230,812 520,961 497,480
Advertising 495,472 415,617 1,083,708 839,976
Amortization of intangible assets 697,298 671,278 1,390,741 1,372,441
Other 1,500,250 1,405,076 2,951,248 2,789,667
------------ ------------- ------------ -------------
10,998,162 10,003,284 22,005,498 19,968,209
------------ ------------- ------------ -------------
Interest expense 996,850 917,026 1,876,374 1,716,180
------------ ------------- ------------ -------------
Total expenses 15,023,001 13,446,707 29,155,526 25,849,966
------------ ------------- ------------ -------------
Income before income taxes 2,971,575 3,944,608 6,145,516 7,402,867
Income taxes 1,041,000 1,415,000 2,151,000 2,665,000
------------ ------------- ------------ -------------
Net income $ 1,930,575 2,529,608 3,994,516 4,737,867
============ ============= ============ =============
Earnings per common share:
Primary $ .10 .12 .20 .22
============ ============= ============ =============
Fully diluted $ .10 .12 .20 .22
============ ============= ============ =============
Weighted average common shares outstanding:
Primary 20,084,688 21,871,363 20,448,466 21,623,596
============ ============= ============ =============
Fully diluted 20,084,688 21,908,240 20,448,466 21,784,264
============ ============= ============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Additional
Paid-in Retained
Capital Earnings Total
<S> <C> <C> <C>
Balances at March 31, 1995 $ 16,059,492 19,698,474 35,757,966
Proceeds from exercise of stock options (45,000 shares),
including tax benefits of $124,140 326,168 - 326,168
Common stock repurchases (176,000 shares) (1,760,524) - (1,760,524)
Net income for the year - 10,556,058 10,556,058
----------- ----------- -----------
Balances at March 31, 1996 14,625,136 30,254,532 44,879,668
Proceeds from exercise of stock options (1,500 shares),
including tax benefit of $3,451 7,831 - 7,831
Common stock repurchases (1,175,000 shares) (10,210,708) - (10,210,708)
Net income for the six months - 3,994,516 3,994,516
----------- ----------- -----------
Balances at September 30, 1996 $ 4,422,259 34,249,048 38,671,307
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,930,575 2,529,608 3,994,516 4,737,867
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan losses 3,027,989 2,526,397 5,273,654 4,165,577
Amortization of intangible assets 697,298 671,278 1,390,741 1,372,441
Amortization of loan costs and discounts 8,210 46,047 16,420 55,256
Depreciation 328,244 256,495 643,434 504,669
Change in accounts:
Other assets, net 156,688 (193,329) (404,612) (1,642,915)
Income taxes payable (1,725,852) (1,696,113) (2,106,470) (1,828,987)
Accounts payable and accrued expenses 792,485 443,890 335,042 525,202
----------- ----------- ----------- -----------
Net cash provided by operating activities 5,215,637 4,584,273 9,142,725 7,889,110
----------- ----------- ----------- -----------
Cash flows from investing activities:
Increase in loans, net (5,135,788) (6,183,453) (9,393,170) (9,791,659)
Net assets acquired from office acquisitions,
primarily loans (409,021) (120,502) (847,941) (171,140)
Costs of organizing new subsidiary - (96,360) - (96,360)
Purchases of premises and equipment (238,746) (561,787) (1,036,536) (798,908)
Purchases of intangible assets (245,999) (60,000) (644,333) (95,000)
----------- ----------- ----------- -----------
Net cash used by investing activities (6,029,554) (7,022,102) (11,921,980) (10,953,067)
----------- ----------- ------------ -----------
Cash flows from financing activities:
Proceeds of senior notes payable, net 4,100,000 2,850,000 12,850,000 3,750,000
Proceeds from exercise of stock options - 32,125 4,380 51,190
Repurchase of common stock (3,158,798) - (10,210,708) -
----------- ----------- ------------- -----------
Net cash provided by financing activities 941,202 2,882,125 2,643,672 3,801,190
----------- ----------- ----------- -----------
Increase (decrease) in cash 127,285 444,296 (135,583) 737,233
Cash, beginning of period 1,430,879 1,484,636 1,693,747 1,191,699
----------- ----------- ----------- -----------
Cash, end of period $ 1,558,164 1,928,932 1,558,164 1,928,932
=========== =========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest expense $ 544,200 366,991 1,708,161 1,594,023
Cash paid for income taxes 2,770,303 3,111,113 4,260,921 4,493,987
Supplemental schedule of noncash financing activities:
Tax benefits from exercise of stock options - 26,381 3,451 36,634
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements of the Company at September 30, 1996
and for the periods then ended were prepared in accordance with the instructions
for Form 10-Q and are unaudited; however, in the opinion of management, all
adjustments (consisting only of items of a normal recurring nature) necessary
for a fair presentation of the financial position at September 30, 1996, and the
results of operations and cash flows for the period then ended, have been
included. The results for the periods ended September 30, 1996, are not
necessarily indicative of the results that may be expected for the full year or
any other interim period.
These consolidated financial statements do not include all disclosures
required by generally accepted accounting principles and should be read in
conjunction with the Company's audited financial statements and related notes
for the year ended March 31, 1996, included in the Company's 1996 Annual Report
to Shareholders.
NOTE 2 - ALLOWANCE FOR LOAN LOSSES
The following is a summary of the changes in the allowance for loan losses
for the periods indicated (unaudited):
<TABLE>
<CAPTION>
Three months Six months
ended September 30, ended September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Balance at beginning of period $ 5,230,171 4,612,166 5,006,703 4,363,612
Provision for loan losses 3,027,989 2,526,397 5,273,654 4,165,577
Loan losses (2,996,724) (2,201,285) (5,212,542) (3,691,757)
Recoveries 195,325 89,933 388,946 189,779
----------- ---------- ---------- ----------
Balance at end of period $ 5,456,761 5,027,211 5,456,761 5,027,211
=========== ========= ========== =========
</TABLE>
NOTE 3 - PARADATA FINANCIAL SYSTEMS (PARADATA)
The following data for ParaData was included in the Consolidated Statements
of Operations for the periods ended September 30, 1996 and 1995 (unaudited):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
-------------------------- --------------------
1996 1995 1996 1995
--------- -------- --------- ------
<S> <C> <C> <C> <C>
Sales and system-support $ 431,925 2,437,821 938,024 3,944,158
Cost of sales 90,285 1,220,131 216,957 2,276,452
---------- ---------- ---------- ----------
Net margin (included in other income) 341,640 1,217,690 721,067 1,667,706
---------- ---------- ---------- ----------
General and administrative expenses
Personnel 250,465 225,513 526,053 463,335
Occupancy and equipment 68,024 66,910 133,759 126,549
Advertising (1,029) 250 3,042 2,284
Amortization of intangibles 7,189 7,188 14,378 14,376
Other 41,921 50,399 91,198 112,292
--------- -------- --------- --------
366,570 350,260 768,430 718,836
Interest expense - 892 - 7,478
--------- -------- --------- --------
Net income (loss) before income taxes $ (24,930) 866,538 (47,363) 941,392
========= ======== ========= ========
</TABLE>
7
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth certain information derived from the
Company's consolidated statements of operations and balance sheets, as well as
operating data and ratios, for the periods indicated (unaudited):
<TABLE>
<CAPTION>
Three months Six months
ended September 30, ended September 30,
1996 1995 1996 1995
(Dollars in thousands)
<S> <C> <C> <C> <C>
Average gross loans receivable (1) $ 106,173 95,684 103,943 93,054
Average loans receivable (2) 83,175 75,715 81,682 73,699
Expenses as a % of total revenue:
Provision for loan losses 16.8% 14.5% 14.9% 12.5%
General and administrative 61.1% 57.5% 62.3% 60.0%
Total interest expense 5.5% 5.3% 5.3% 5.2%
Operating margin (3) 22.1% 28.0% 22.7% 27.4%
Return on average assets (annualized) 8.3% 11.5% 8.7% 11.0%
Offices opened or acquired, net 9 1 24 31
Total offices (at period end) 306 275 306 275
</TABLE>
(1) Average gross loans receivable have been determined by averaging month-end
gross loans receivable over the indicated period.
(2) Average loans receivable have been determined by averaging month-end gross
loans receivable less unearned interest and deferred fees over the
indicated period.
(3) Operating margin is computed as total revenues less provision for loan
losses and general and administrative expenses, as a percentage of total
revenues.
Comparison of Three Months Ended September 30, 1996, Versus
Three Months Ended September 30, 1995
Net income amounted to $1,931,000 for the three months ended September 30,
1996, a 23.7% decrease over the $2,530,000 earned during the corresponding
three-month period of the previous year. This decrease resulted from a decrease
in operating income (revenues less provision for loan losses and general and
administrative expenses) of approximately $893,000, or 18.4%, combined with a
slight increase in interest expense and offset by a decrease in income taxes.
Interest and fee income for the quarter ended September 30, 1996, increased
by $1,474,000, or 10.1%, over the same period of the prior year. This increase
resulted from a $7.5 million increase, or 9.9%, in average loans receivable over
the two corresponding periods. The Company continues to be affected by the
slower than historical growth rates in its loan portfolio, which is a carry
forward from the disappointing prior holiday season (December 1995) which is
extremely crucial to the Company's growth each year. Insurance commissions and
other income decreased by $871,000, or 31.9%, during the quarter ended September
30, 1996, when compared to the same quarter of the prior year. This decrease was
due primarily to the decrease of gross profit on sales from ParaData, the
Company's computer subsidiary, which is not expected to repeat the contribution
to overall earnings that it made during fiscal 1996. Net revenues from ParaData
amounted to $342,000 for the three months ended September 30, 1996, compared to
$1,218,000 for the same period of the prior year.
8
<PAGE>
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
Comparison of Three Months Ended September 30, 1996, Versus
Three Months Ended September 30, 1995, continued
Total revenues amounted to $18.0 million during the quarter ended September
30, 1996, representing a 3.5% increase over the $17.4 million in total revenues
for the same quarter of the prior year. Revenues from the 244 offices open
throughout both three-month periods increased by approximately 5.2%. At
September 30, 1996, the Company had 306 offices in operation, an increase of 9
offices during the current quarter, and 24 offices since the beginning of the
fiscal year.
The provision for loan losses in the quarter ended September 30, 1996,
increased by $502,000, or 19.9%, over the same period of the prior year. This
increase resulted from a combination of increases in both the general allowance
for loan losses as well as the amount of loans charged off. Net charge-offs for
the current quarter amounted to $2,801,000, an increase of $690,000, or 32.7%
over the amount charged off during the quarter ended September 1995. The large
increase in charge-offs is partially a result of increasing loans outstanding,
as well as an increase in the overall levels of loans charged off. Management
believes that the Company's recent experience with charge-offs is consistent
with a national trend toward increased consumer defaults and bankruptcies.
Management is monitoring the Company's delinquencies and charge-offs closely and
is considering a number of attentive actions, including without limitation
tightening credit standards for small loans and increasing collection efforts.
Until the Company's delinquencies and charge-offs return to historical levels,
management expects this trend of higher charge-offs to negatively affect the
results of operations of the Company's small loan business.
General and administrative expenses for the quarter ended September 30,
1996, increased by $995,000, or 9.9%, over the same quarter of fiscal 1995. This
increase resulted primarily from the additional expenses associated with the 31
new offices opened or acquired between September 30, 1995, and September 30,
1996. Excluding the expenses associated with ParaData, overall general and
administrative expenses when divided by the average open offices remained level
when comparing the two periods.
Interest expense increased by $80,000, or 8.7%, when comparing the two
corresponding quarterly periods. This increase resulted from an increase in the
level of debt outstanding primarily due to the funds used in conjunction with
the stock repurchase program. Through September 30, 1996, the Company has
repurchased 1,351,000 share of its common stock for a total cost of
approximately $12 million.
The effective income tax rate decreased slightly to 35.0% during the
quarter ended September 30, 1996, from 35.9% during the prior year quarter as a
result of a corporate reorganization which reduced state income taxes.
Comparison of Six Months Ended September 30, 1996,
Versus Six Months Ended September 30, 1995
For the six-month period ended September 30, 1996, net income amounted to
$4.0 million, a decrease of $743,000, or 15.7%, from the corresponding six-month
period of the prior year. Operating income decreased by $1,097,000, or 12.0%,
over the two periods. This decrease combined with an increase in interest
expense was offset by a decrease in income taxes.
Total revenues amounted to $35.3 million during the current six-month
period, an increase of $2.0 million, or 6.2%, over the prior-year period. This
increase resulted from an increase in interest and fee income of 10.1% offset by
a reduction in insurance and other income of 18.0%. Revenues from the 244
offices open throughout both six-month periods increased approximately 3.5%.
Interest and fee income rose by $2.9 million, or 10.1% during the two
corresponding six-month periods primarily as a result of increases in loan
balances outstanding. Average loans receivable were $81.7 million during the six
months ended September 30, 1996, representing a 10.8% increase over the average
balances of the prior year. The decrease in other income resulted primarily from
a reduction in the net revenues from ParaData of $947,000 (see page 7).
9
<PAGE>
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
Comparison of Six Months Ended September 30, 1996,
Versus Six Months Ended September 30, 1995, continued
The provision for loan losses increased by $1,108,000, or 26.6% during the
current six-month period when compared to the same period of fiscal 1996. This
increase resulted in an increase in the general reserve for loan losses which is
a function of gross loans outstanding, as well as an increase in loan losses.
Net charge-offs increased by $1,322,000, or 37.7%, when comparing the two
six-month periods. As a percentage of average loans, this represented an
increase to 11.8% during the current six-month period compared to 9.5% for the
same period of the prior fiscal year. The increase in delinquencies and loan
losses during the six-month periods resulted in large part from the trend
discussed above.
General and administrative expenses increased by $2,037,289, or 10.2%,
during the most recent six-month period. As a percentage of total revenues,
these expenses increased from 60.0% during the prior year six-month period to
62.3% during the current period. This increase resulted from the additional
offices opened or acquired during the past year. Excluding the expenses
associated with ParaData, overall general and administrative expenses, when
divided by the average open offices, decreased by .9% when comparing the two
six-month periods.
Interest expense increased by approximately $160,000 during the current
six-month period as a result of the increase in the level of debt outstanding
primarily due to the funds used to repurchase the Company's common stock.
The effective income tax rate decreased slightly to 35.0% during the six
months ended September 30, 1996, from 36.0% for the same period ended September
30, 1995, as a result of certain state tax benefits resulting from a corporate
reorganization.
Liquidity and Capital Resources
The Company's primary sources of funds are cash flow from operations and
borrowings under its revolving credit agreement. The Company's primary ongoing
cash requirements are funding the opening and operation of new offices, the
overall growth of loans outstanding, the repayment of existing debt, and ongoing
repurchases of its common stock under the stock repurchase program.
The Company has a $50.0 million revolving credit agreement and $16.0
million of senior term notes outstanding with institutional lenders. The term
notes provide for interest payments to be made semi-annually at a fixed rate of
8.5% with annual principal payments of $4.0 million to be made each year (the
next payment being due on December 1, 1996). The revolving credit facility
expires on November 30, 1998, and bears interest, at the Company's option, at
the agent's prime rate or LIBOR plus 1.60%. At September 30, 1996, the interest
rate under the revolving credit facility was 7.13%, and the Company's
outstanding balance under this facility was $34.6 million, leaving $15.4 million
in borrowing availability under existing borrowing base limitations, which are
based on eligible loans receivable. The revolving credit facility also provides
for an additional $10.0 million in availability for the period November 15, 1996
through March 15, 1997, to insure that adequate funds are available to fund the
anticipated loan growth during the Company's traditional busy season. Borrowings
under the revolving credit agreement and the term notes are secured by a lien on
substantially all the tangible and intangible assets of the Company and its
subsidiaries pursuant to various security agreements.
The Company believes that cash flow from operations and borrowings under
its revolving credit facility will be adequate to fund the initial principal
payment due under the term notes as well as fund the expected costs of opening
and operating new offices, including funding initial operating losses of new
offices, and funding loans receivable originated by those offices and the
Company's other offices and fund planned stock repurchases under the repurchase
program.
10
<PAGE>
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
Inflation
The Company does not believe that inflation has a material adverse effect
on its financial condition or results of operations. The primary impact of
inflation on the operations of the Company is reflected in increased operating
costs. While increases in operating costs would adversely affect the Company's
operations, the consumer lending laws of three of the six states in which the
Company currently operates allow indexing of maximum loan amounts to the
Consumer Price Index. These provisions will allow the Company to make larger
loans at existing interest rates, which could offset the effect of inflationary
increases in operating costs.
Quarterly Information and Seasonality
The Company's loan volume and corresponding loans receivable follow
seasonal trends. The Company's highest loan demand occurs each year from October
through December, its third fiscal quarter. Loan demand is generally the lowest
and loan repayment is highest from January to March, its fourth fiscal quarter.
Loan volume and average balances remain relatively level during the remainder of
the year. This seasonal trend causes fluctuations in the Company's cash needs
and quarterly operating performance through corresponding fluctuations in
interest and fee income and insurance commissions earned, since unearned
interest and insurance income are accreted to income on a collection method.
Consequently, operating results for the Company's third fiscal quarter are
significantly lower than in other quarters and operating results for its fourth
fiscal quarter are generally higher than in other quarters.
Legal Proceedings
The Company is a party to certain legal proceedings. See Part II, Item 1.
11
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its Georgia subsidiary are named as co-defendants with a
number of other finance companies, jewelry and furniture retailers,
and insurance companies in an action, formerly pending in U.S.
District Court in Georgia which has been transferred and consolidated
with other pending actions under the caption In re American Insurance
Company, "Non-filing Insurance" Fee Litigation (Multidistrict
Litigation Docket No. 1130, U.S. District Court, District of Alabama,
Northern Division). The consolidated action involves the defendants'
non-file insurance practices. The complaint alleges, among other
things, that the defendants' non-file insurance coverages do not
constitute true insurance, which result in alleged federal
truth-in-lending, RICO and antitrust violations and state fraud,
breach of contract and conversion violations, and seeks certification
of a nationwide class of plaintiffs to recover money damages and
injunctive relief. The complaint in this action was filed on April
18, 1995, the Company has filed an answer and the parties are in the
discovery process. The Company has been advised that certain of the
defendants in the case have agreed to settle the claims made against
them by paying money damages to the plaintiffs. The Company has also
been advised that at least one of the settling defendants has agreed
to change its non-file insurance practices. If the Company's non-file
insurance practices are found to be invalid, the Company could be
required to refund non-file insurance fees, pay other significant
damages to the plaintiffs or change its non-file insurance practices
going forward, and the Company could experience a reduction in future
income unless legislative reforms are enacted. The Company disputes
the allegations made in the complaint, and intends to continue to
defend itself vigorously. Although the Company is unable to predict
with certainty the outcome of this litigation, management expects
that it will not have a material adverse effect on the Company's
financial position or results of operations.
Management's statement of expectation about the outcome of this
litigation should be deemed a forward-looking statement, and no
assurance can be given that management's expectation will prove
correct, as such expectation is subject to certain risks,
uncertainties and assumptions based on the preliminary nature of the
case and the vagaries of litigation generally. Should one or more of
these risks materialize or should underlying assumptions prove
incorrect, the actual outcome of this litigation could differ
materially from management's expectation.
The Company from time to time and currently is involved as plaintiff
or defendant in various other legal actions incident to its business.
The current legal activities are not believed to be material to the
financial condition of the Company.
Item 2. Changes in Securities
None. The Company's credit agreements contain certain restrictions on
the payment of cash dividends on its capital stock.
Item 4. Submission of Matters to a Vote of Securityholders
(a) The 1996 Annual Meeting of Shareholders was held on August 7,
1996.
(b) Pursuant to Instruction 3 to Item 4, this paragraph need not
be answered.
(c) At the 1996 Annual Meeting of Shareholders, the following four
matters were voted upon and passed. The tabulation of votes was:
12
<PAGE>
(1) The election of seven Directors to serve until the 1997
Annual Meeting of Shareholders:
<TABLE>
<CAPTION>
VOTES IN FAVOR WITHHOLD AUTHORITY
IN PERSON AS PROXY IN PERSON AS PROXY
<S> <C> <C> <C> <C>
Ken R. Bramlett, Jr. 17,038,182 66,353
-------------- ------------ -------------- --------
James R. Gilreath 16,450,302 654,233
-------------- ------------ -------------- ---------
William S. Hummers III 17,095,652 8,883
-------------- ------------ -------------- -------
A. Alexander McLean III 17,037,602 66,933
-------------- ------------ -------------- --------
R. Harold Owens 17,037,662 66,873
-------------- ------------ -------------- --------
Charles D. Walters 17,037,632 66,903
-------------- ------------ -------------- --------
Charles D. Way 17,095,502 9,033
-------------- ------------ -------------- --------
</TABLE>
(2)The ratification of the selection of KPMG Peat
Marwick as Independent Auditors:
<TABLE>
<CAPTION>
VOTES IN FAVOR VOTES AGAINST ABSTENTIONS
IN PERSON AS PROXY IN PERSON AS PROXY IN PERSON AS PROXY
<S> <C> <C> <C> <C> <C> <C>
17,082,218 15,317 7,000
------------- ------------ --------------- -------------- --------------- -------------
</TABLE>
13
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
PART II. OTHER INFORMATION, CONTINUED
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Previous Company
Exhibit Exhibit Registration
Number Description Number No. or Report
<S> <C> <C> <C>
3.1 Second Amended and Restated Articles of Incorporation of the 3.1 1992 10-K
Company
3.2 First Amendment to Second Amended and Restated Articles 3.2 1995 10-K
of Incorporation
3.3 Amended Bylaws of the Company 3.4 33-42879
4.1 Specimen Share Certificate 4.1 33-42879
4.2 Articles 3, 4 and 5 of the Form of Company's Second 3.1, 3.2 1995 10-K
Amended and Restated Articles of Incorporation
4.3 Article II, Section 9 of the Company's Second Amended 3.2 1995 10-K
and Restated Bylaws
4.4 Revolving Credit Agreement, dated as of December 1, 1992, 4.6 33-61524
between Harris Trust and Savings Bank, the Banks signatory
thereto from time to time and the Company
4.5 First Amendment re: Note Agreements, Revolving Credit 4.5 1994 10-K
Agreement and Security Agreement, Pledge and Indenture of Trust,
dated as of April 2, 1993, between the Company and the Banks
signatory thereto
4.6 Second Amendment to Revolving Credit Agreement, dated as 4.6 1994 10-K
of September 1, 1993, between the Company and the Banks
signatory thereto
4.7 Third Amendment to Credit Agreement/Second Amendment to 4.7 1995 10-K
Revolving Credit Notes, dated as of November 1, 1994, between
the Company and the Banks signatory thereto
4.8 Third (sic) Amendment to Credit Agreement, dated as of March 4.8 1995 10-K
13, 1995, between the Company and the Banks signatory thereto
4.9 Fifth Amendment to Credit Agreement, dated as of June 30, 1995 4.9 1996 10-K
4.10 Sixth Amendment to Credit Agreement, dated as of September 4.10 1996 10-K
1, 1995
4.11 Seventh Amendment to Credit Agreement, dated as of November 4.11 1996 10-K
1, 1995
4.12 Eighth Amendment to Credit Agreement, dated as of June 4.12 1996 10-K
1, 1996
14
<PAGE>
4.13 Term Note Agreement, dated as of December 1, 1992, between 4.7 33-61524
Jefferson-Pilot Life Insurance Company and the Company
4.14# Term Note Agreement, dated as of December 1, 1992, between NA NA
Principal Mutual Life Insurance Company and the Company
4.15 First Amendment to Note Agreements, dated November 1, 1994, 4.11 1995 10-K
between Principal Mutual Life Insurance Company, Jefferson-
Pilot Life Insurance Company and the Company
4.16 Security Agreement, Pledge and Indenture of Trust, dated as 4.9 33-61524
of December 1, 1992, between the Company and Harris Trust
and Savings Bank, as Security Trust
4.17 Second Amendment to Security Agreement, Pledge and Indenture 4.10 1994 10-K
of Trust, dated as of September 1, 1993, between the Company
and Harris Trust and Savings Bank, as Security Trustee
4.18 Third Amendment to Security Agreement, Pledge and Indenture 4.18 1996 10-K
of Trust, dated as of June 30, 1995
4.19 Fourth Amendment to Security Agreement, Pledge and Indenture 4.19 1996 10-K
of Trust, dated as of November 1, 1995
4.20 Fifth Amendment to Security Agreement, Pledge and Indenture 4.20 1996 10-K
of Trust, dated as of June 1, 1996
10.1+ Employment Agreement of Charles D. Walters, effective April 1, 10.1 1994 10-K
1994
10.2+ Employment Agreement of A. Alexander McLean, III, effective 10.2 1994 10-K
April 1, 1994
10.3+ Employment Agreement of R. Harold Owens, effective June 26, 10.3 1995 10-K
1995
10.4 Securityholders' Agreement, dated as of September 19, 1991, 10.5 33-42879
between the Company and certain of its securityholders
10.5+ 1992 Stock Option Plan of the Company 4 33-52166
10.6+ 1994 Stock Option Plan of the Company, as amended 10.6 1995 10-K
10.7+ The Company's Executive Incentive Plan 10.6 1994 10-K
10.8+ The Company's Executive Strategic Incentive Plan 10.8 1995 10-K
10.9+ Amendment No. 1, dated as of April 1, 1996, to the Executive 10.9 1996 10-K
Strategic Incentive Plan
</TABLE>
# Omitted from filing -- substantially identical to immediately preceding
exhibits, except for the parties thereto and the principal amount involved.
+ Management contract or other compensatory plan required to be filed under Item
14(c) of this report and Item 601 of Regulation S-K.
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K during the quarter ended September
30, 1996.
15
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WORLD ACCEPTANCE CORPORATION
Dated: November 13, 1996 /s/ C. D. Walters
---------------------
C. D. Walters, Chief Executive Officer
Dated: November 13, 1996 /s/ A. A. McLean III
------------------------
A. A. McLean III, Executive Vice President
and Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,558
<SECURITIES> 0
<RECEIVABLES> 85,024
<ALLOWANCES> 5,457
<INVENTORY> 0
<CURRENT-ASSETS> 81,125
<PP&E> 6,053
<DEPRECIATION> 0
<TOTAL-ASSETS> 94,289
<CURRENT-LIABILITIES> 4,536
<BONDS> 51,082
0
0
<COMMON> 38,671
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 94,289
<SALES> 0
<TOTAL-REVENUES> 35,301
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 22,005
<LOSS-PROVISION> 5,274
<INTEREST-EXPENSE> 1,876
<INCOME-PRETAX> 6,146
<INCOME-TAX> 2,151
<INCOME-CONTINUING> 3,995
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,995
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
